CYIL vol. 8 (2017)

CYIL 8 ȍ2017Ȏ RESPONSIBILITY FOR VIOLATIONS OF INVESTORS’ RIGHTS … may seem paradoxical and highlights the significant consequences of the transfer of the external competence for foreign direct investment to the Union. These scenarios are pure model examples. The practice of investment arbitration shows that the claims brought by the investors often have a very complex factual and legal basis, which in case of a dispute brought against the Union or its Member States may involve combinations of more of the variants outlined above, while violations of the treaty standards cannot be easily attributed to EU and Member State respectively, especially in the early stages of the dispute. 5 The third factor, which is very relevant from the practical point of view, is the question of financial aspects of investment disputes. Investment treaty arbitrations under EU IIAs present a potentially significant financial burden on the respondent in the proceedings, involving the obligation to pay compensations eventually awarded by tribunals, and also costs incurred in relation to the conduct of the arbitration proceedings. The question is whether the apportionment of the financial burden between the Union and Member States should generally follow the allocation of international responsibility, or should be based on different principles or criteria. 2.2 Allocation of International Responsibility between the EU and its Member States under General International Law The most appropriate starting point for the analysis of the allocation of international responsibility for breaches of Union international agreements between the EU and Member States are the UN International Law Commission’s (ILC) Draft Articles on the responsibility of international organizations (DARIO). 6 The basic rule for governing the responsibility of international organizations can be found in Article 4 DARIO. According to this provision, there is an internationally wrongful act of an international organization when conduct consisting of an action or omission: (a) is attributable to that organization under international law; and (b) constitutes a breach of an international obligation of that organization. Given the specific features of the EU as an international organization, both these conditions give rise to certain theoretical and practical complications. 7 If we begin with the second of the two conditions (breach of an international obligation), it is possible to distinguish two situations. First, the EU may in theory conclude an IIA with a third country alone, without parallel participation of Member States. In such a situation, it would be only the Union which would assume international obligations from such an agreement and arguably only the Union could bear international responsibility for violations 5 See also the scenarios indicated in: European Parliament, Directorate-General for External Policies of The Union, Responsibility in Investor-State-Arbitration in the EU: Managing Financial Responsibility Linked to Investor- State Dispute Settlement Tribunals Established by EU’s International Investment Agreements, EXPO/B/INTA/ FWC/2009-01/Lot 7/31, December 2012 (Authors: Christian Tietje, Emily Sipiorski, Grit Töpfer), 19-20. 6 Draft articles on the responsibility of international organizations, Adopted by the International Law Commission at its sixty-third session, in 2011, A/66/10, para. 87. 7 For detailed critical analysis of these criteria from the perspective of the EU see KUIJPER, P. J., PAASIVIRTA,E., Further Exploring International Responsibility: The European Community and the ILC’s Project on Responsibility of International Organizations, 1 International Organizations Law Review 111-138 (2004).

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